In general, startups that are still just ideas getting funded is a completely dead practice.

In the 1980s, when I first started raising money from the VC community, if you had some sort of track record, some idea that was novel and looked like it would make a pile of money, and at least the beginnings of a team, you could raise money.

In the 1990s and early 2000s, when I was working with VCs to evaluate deal flow and vet prospective companies for investment, we were still seeing a lot of what we called "three guys and a PowerPoint" opportunities. No real work had been done, but there was still a team, and at least a kernel of patentable IP.

By now, in 2017, no one is investing in ideas, only in execution. You have to have at least put together some sort of Minimum Viable Product, and demonstrated some sort of traction - which means you need a team, as well as a good idea, and some hard work.

What happened? Why are ideas alone no longer "investable"?

I'd point to four things.

First, thedot-com bubblehad a huge impact. There was ridiculous, stupid amounts of money chasing big deals that were of improbably low likelihood to ever produce money "but they might! someday!" When the market corrected, it became apparent that a very large amount of that money was not placed in portfolio companies that were in fact viable.

Backlash was inevitable, and the bar for investment got much, much higher.

The second thing was this nifty little book that seems to have a disproportionate amount of mindshare relative to what one would have expected:The Lean Startup.

Don't get me wrong - there's a huge amount of value in the book, but most of that is passed over in favor of a procedural take-away: the notion that you build out a Minimum Viable Product, then get customer engagement, then iterate based on that.

In VC-land, that's translated to "come see us once you have an MVP and customer engagement".

So: no MVP, no customers, no deal.

The third thing is that infrastructure is now off the table as an issue. In the 90s, if I needed a globally distributed server infrastructure with strong Internet connectivity everywhere, I had to build it myself, from the nuts and bolts up - space, power, HVAC, racks, servers, switches, routers, staff, the whole enchilada. That's seriously expensive (trust me on this, I've done it more than a few times) and if your success depended on it, you had to have investors willing to fund it - and more to the point, the investors understood that, and were willing to fund you to build in advance of you having actually built anything.

These days? Pfffftttt.... if you give me a prospectus that says you're buying any infrastructure beyond laptops, it's pretty much guaranteed never to see the light of day. (Exceptions made for real infrastructure plays, which I still entertain.)

You can build infinitely scalable infrastructure on Amazon Web Services that with economics, far outstrip actually owning anything until you're at near-Netflix scale. All bought by-the-hour, no commitments.

That's had a huge impact on everything, because now I can insist that you build something in advance of investment, because the bar is so low on hosting any kind of software and distributed system infrastructure. This feeds into the two points above, big-time.

Lastly, somewhere along time, being in venture capital became "cool." You might not be able to be the next hot entrepreneur, but you canbask in the reflected gloryif you work in VC, somehow.

I was talking to a seasoned entrepreneur last week, a guy who's been around nearly as long as I have, in big network equipment plays mostly. He said that in his last round of fund raising he was being asked for metrics and drilled with acronyms that he didn't even understand, and opined that he needed to go get an MBA just to be able to talk to these "finance kids" who seem to be the gatekeepers to the real decision makers.

You know, the guys that you used to deal with straight up on the first call.

Gone are the days when you could pick up the phone and getBen RosenorVinod KhoslaorFelda HardymonorJohn Doerron the phone in one shot. There's a network of introductions and handoffs and gatekeepers who fend off even the warmest of introductions - not because the decision makers are "too busy", but because the intermediaries are seeking power of their own.

The process has become byzantine and laborious and fraught with peril. And if you don't have all the little boxes checked, it just won't happen.

On the whole, there are plusses.

Really stupid ideas don't get funded, because you sort of have to prove they work first.

But if you've got something that's more than half a standard deviation from the norm?

Yeah, that's going to be harder. Much much harder.

You can't fund ideas, or a team with a track record, just on its face, any more.

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